Pages

Monday, January 30, 2017

Will FM make any big announcement for sick PSUs?

AS Finance Minister Arun Jaitley iz giving his final touches to the Budget documents, hopes soar for the PSUs, especially those that are battling to stay afloat. The public sector has tremendous hope pinned on the minister’s annual financial statement. One of the prime drivers of Indian economy, public sector contributes considerably for the overall growth of the economy. Post demonetization, with the PSU banks being flushed with plenty of hard cash, the FM might announce some big measures for the sector. Here are some issues where the sector can hope... for some big announcements from the Finance Minister.Strategic sale of PSU units
The Centre might announce a comprehensive policy on strategic sale of sick PSUs. The strategic sale policy will continue next fiscal but it will be modified to suit current realities and focus on unviable units. A big-ticket disinvestment, including strategic sales in high-value companies such as Bharat Heavy Electricals Limited (BHEL), and oil and defence public sector units (PSUs) such as Oil and Natural Gas Corporation (ONGC), Indian Oil Corporation (IOC), Hindustan Petroleum Corporation (HPCL), Bharat Petroleum Corporation (BPCL), Hindustan Aeronautics Limited (HAL) and Bharat Earth Movers Ltd (BEML) will be top priority area for the Union Minister.
In the last year’s budget, the Union government aimed to raise Rs.56,500 crore by selling stakes in PSUs, out of which Rs.36,000 crore were to come from minority stake sales and Rs.20,500 crore from strategic stake sales. So far, Centre has mopped up Rs 23,500 crore this fiscal through share sale and share buyback by the companies. The immediate candidates lined up for disinvestment include the state-run helicopter services company Pawan Hans Ltd and the CPSE ETF (exchange traded fund). ONGC, Coal India, Indian Oil Corp, Gail India, Oil India, Power Finance Corp, Bharat Electronics, Rural Electrification Corp, Engineers India and Container Corporation of India are some of the PSUs lined up for disinvestment.
To meet the fiscal deficit target, the government will rely on proceeds from disinvestment for which the budget will set ambitious targets.
A number of PSUs have already been identified as loss-making and it would be better even in terms of the Exchequer to go ahead with strategic sale in them.
A final decision on the issue is likely to be announced in the Union Budget where Finance Minister Arun Jaitley is expected to reiterate the government’s policy for strategic disinvestment.Role of Niti Aayog
The FM might give some more task to NITI Aayug in evolving policy vis-à-vis the sick PSUs. Last year, the government think tank identified 32 loss-making companies for strategic disinvestment, including central public sector enterprises (CPSEs) such as Bharat Pumps & Compressors, Tyre Corporation of India, Central Inland Water Transport Corporation and Bengal Chemicals & Pharmaceuticals, among others. Of the 32 companies, 10 could see strategic disinvestment right away while for the other 22 the suggestion is to revive while retaining a subsequent option for strategic disinvestment.Loss making PSUs
The government is also likely to announce a comprehensive package for the revival or closure of loss-making PSUs. The government has already begun the process of closing down sick PSUs such as three unviable units of HMT, including the once popular HMT Watches, along with HMT Chinar Watches and HMT Bearings. The Department of Public Enterprises — the nodal agency for all central PSUs – already has in place a list of loss-making firms that are close to six dozen.Selling of sick PSUs
There may be an announcement on a roadmap to sell off loss-making public sector undertakings, which are lying idle, to generate revenues. The list of PSUs to be privatised will be shortlisted soon, and a plan about which ones to be taken up in the first stage is being finalised.Privatisation of sick PSUs
The government has already made it clear that it will shut some of the sick PSUs that are no longer sustainable. But the finance minister has also expressed readiness to look at privatisation of some loss-making public sector companies. Will he spell out some concrete measures? For this we have to wait till Feb 1.Bailing out sick PSUs
It is expected that the Finance Minister might announce some bailout package for the ailing PSUs. Some cash-rich PSUs may be involved in aiding the revival of the sick ones as advocated by ex-NTPC chairman Arup Roy Choudhury committee. But these cash-rich PSUs are so far unwilling to spend money in reviving their sick brethren. The report has already been submitted to the ministries of public enterprise and heavy industries.Listing of profit making PSUs
There might be a big announcement about possible listing of profitable PSUs on stock exchanges through public sales of shares. The government will invite global companies to bid for its stakes in such companies with the aim of inducting cutting edge technology and improving corporate governance in them.